Recent Articles

If you have been wondering where those extra profits that Intel raked in during its best quarter ever came from in Q2, it looks like some of that black ink came right out of the hide of Advanced Micro Devices.

The CPU and GPU seller posted decent sales of $1.65bn, up 39.6 per cent, in the quarter ended in June. That's more than the 34.2 per cent growth that Intel posted, hitting $10.8bn in revenues. If you don't take into account the $1.45bn that Intel gave to the European Commission to pay some antitrust fines, then Intel was able to grow earnings in Q2 by 175 per cent to $2.9bn, or about 26.9 per cent of the dough dropped to the bottom line.

But not so at AMD, which had an $83m net income in the quarter (or a half percentage point of revenue) on a non-GAAP basis and then booked a $120m loss related to its 28 per cent stake in GlobalFoundries, the wafer baking company that AMD spun out last year. So AMD had a net loss of $43m, which was nonetheless a lot better than the $330m in red ink in the year-ago quarter and hence led to lots of congratulatory comments from Wall Street analysts. But the bottom line is that Intel has to run foundries as well as sell chips, and it is able to extract profits from it, and AMD has not.

AMD started an x64 chip price war with the launch of its "Magny-Cours" Opteron 6100s in January and continued to push down price points with the launch of the "Lisbon" Opteron 4100s in June. But in a conference call with Wall Street analysts, Dirk Meyer, AMD's president and chief executive officer, said that server partners took a long time to ramp up their machines using the new AMD processors.

Many of them did not have Opteron 6100 machines in the field until June, which hurt AMD's top line as well as its bottom line. The Opteron 4100 ramp is just getting underway now, and it is mostly relegated to cloudy infrastructure providers, not volume server makers, so gauging how this chip will do is somewhat more difficult. (That is El Reg's sentiment, not Meyer's).

In AMD's Computing Solutions group, which sells microprocessors and chipsets for desktops, notebooks, and servers, revenues were up 30.9 per cent, to $1.21bn in the second quarter and operating income for these products came to $128m, compared to a $67m operating loss against $926m in chip sales in Q2 2009. Sequentially, AMD only grew revenues in microprocessors by 4.5 per cent from $1.16bn, and operating margins actually fell sequentially from $146m in Q1 2010.

Across all CPU types, average selling prices of chips were up year-on-year, but flat sequentially. Drilling down into the Opteron server chips, Meyer said that Opteron 6100 chip shipments nearly quadrupled compared to the first quarter, Opteron 4100s did not contribute much to sales in Q2. AMD expects the full effect of its Opteron launches earlier this year to kick in during the third quarter, and it is still confident that it can compete and wrest some market share from Intel in the x64 war. In the second quarter, Meyer said that server microprocessor average selling prices (ASPs) were up, units were down, and revenues were "a wee bit down."

"Intel clearly knocked the ball out of the park with both revenue and units up," Meyer conceded in the call. But he said that AMD had historically been able to get 25 per cent market share in server processors and that it had exited the first quarter with under a 10 per cent share.

>AMD thinks it can beat Intel's Xeons on price, bang for the buck, and oomph per watt, and the case can be made for AMD to get back to the kind of share it enjoyed when Intel's Xeons and Itaniums were not doing so good. It will be interesting to see what the IT shops believe when they vote with their dollars in the second half. This is when the Opteron-Xeon war gets going in earnest.

AMD's Graphics group, which peddles discrete graphics cards and GPU co-processors, posted an 87.2 per cent bump in sales in the quarter, hitting $440m, and shifted to a $33m operating gain compared to a $17m operating loss a year ago. But graphics product sales were only up 7.6 per cent sequentially, and in Q1 2010, graphics posted a $47m operating margin.

Meyer said that about half of the graphics cards that AMD shipped in Q2 were DirectX-11 compatible units; in the past three quarters of shipping its latest GPUs, AMD has pumped out over 16 million units. Meyer also said that discrete graphics for notebooks had an 18 per cent growth spike in the quarter, which was one of the reasons why ASPs for graphics products fell. AMD shipped a record number of GPUs in the quarter.

AMD did not provide a huge amount of guidance for the third quarter ending in September, except that it expects revenues to be "seasonally up."